2018 (2) TMI 545 - AT - Central Excise

CENVAT credit - input services - service utilized in relation to modernization, renovation and repair of the factory - Held that - service utilized in relation to modernization, renovation and repair of the factory are definitely fall within the meaning of input service even though construction of a building or civil structure or part thereof has been placed under exclusion clause of the said definition of input service - harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause (a) relating to construction service of the definition of input service , it is clear that the construction service relating to modernization, renovation and repair of the factory continued to be within the meaning of input service and accordingly, the Service Tax paid on such service is eligible to credit. Undisputedly, the appellants carried out modernization, renovation or repair work in their factory premises as is evident from the input service invoices enclosed with the respective appeal paper book; therefore, is eligible to credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are eligible for credit of Service Tax paid on 'construction service' for modernization, renovation, or repair of their factory premises.

Analysis:
The appeals were filed against orders-in-appeal passed by the respective Commissioner (Appeals) regarding the admissibility of credit of Service Tax paid on 'Construction Service' for modernization, renovation, or repair of factory premises. The appellants alleged that the credit availed on this service was irregular due to an amendment excluding 'construction service' from the definition of 'input service' effective from 1.4.2011. The demands for recovery of inadmissible credit were confirmed with interest and penalty. The appellants contended that 'modernization, renovation, and repair' of the factory continued to be part of the definition of 'input service' post-amendment, citing a circular for support.

The Revenue argued that all 'construction service' within factory premises fell outside the scope of the amended definition of 'input service,' making Service Tax paid on such services inadmissible for credit. However, the appellants argued that while new construction was no longer eligible, activities related to 'modernization, renovation, or repair' of existing plant and machinery within the factory premises still fell within the definition of 'input service.' The Tribunal examined the old and amended Rule 2(l) of the Cenvat Rules 2004 to determine the eligibility of credit for 'construction service.'

The Tribunal concluded that services related to modernization, renovation, and repair of the factory premises were within the meaning of 'input service,' despite construction of buildings or civil structures being excluded. A clarification issued by the Board supported this interpretation, stating that services provided in the inclusive part of the definition of 'input service' were eligible for credit. As the appellants had undertaken modernization, renovation, or repair work in their factory premises, the Service Tax paid on such services was deemed eligible for credit. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief, if any, as per the law.